IMPORTANT CONCERN INVESTMENT MANAGEMENT

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Annals of the „Cons tantin Brâncuş i” Univers ity of Târgu Jiu, Economy S eries , Is s ue 3 / 2 0 1 4

„ACADEMICA BRÂNCUŞI” PUBLISHER, ISSN 2344 – 3685/ISSN-L 1844 - 7007

IMPORTANT CONCERN INVESTMENT MANAGEMENT

SINTEA (ANGHEL) LUCICA

PHD.ASSISTANT PROFESSOR,

‘ANDREI SAGUNA’UNIVE

RSITY OF CONSTANTA,

E-mail: lucicasintea@yahoo.com

Abstract

The issue of probabilities, uncertainties and risk s has concerned society since anci ent times. By probability we can see the possible realization of an act or event under certain conditions. Uncertainty is caused by emotional status of the decision mak er due to more subjective factors or to the k nowledge to achieve an objective. Risk is a combination of the two elements characterized by a possible description of probabilities under insecurity uncertainty conditions.

Keywords: factors, risk , economy, economists, managers, probability, uncertainty, decisions

JEL Classification: M40, M41,G01,G32

1. Introduction and context of the study

Investments represent the main way of economic development in an entity. Also investments bear the greatest risks. When decisions have to be made it must be taken into account, especially in this time of ec onomic crisis, in addition to the purchase price of materials and capital goods, the quality of goods, the delivery time and sales of capital assets, the capacity of the capital to modify its parameters to obtain other goods with other possibilities, othe r dimensions, depending on market requirements to adapt to the rapid evolution that occurs, while focusing our attention on the protection of the environment.

2. Economic reform strategies

Once the integration into the European Union, Romania has known qu alitative changes in the commercial activity, the acts of exchange, developed a modern methods and models take -off point of the resources and means of production to the requirements of competitive external partn

All these measures have led to ongoing improvements earners in advanced technology areas, to modernising capital used, the effectiveness of the work of the human factor to raise awareness of the role of the market economy with its implications.

In order for sustainable economic and social develop ment and has been up to the level of economic development agencies of prognosis and a business and tax policies, the establishment of working procedures, just so that they can be traced back their activity.

At the macro-economic and employers' associations consider the accentual on investments, demonstrating that they lead to the achievement of sustainable development of the economy and social to meet the needs of the population. But it should be carried out with greater responsibility feasibility studies and impact on med correcting deviations from time.

So should not be authorized any activity opinion front environment agency, notice to be given as a result of serious and thorough studies of experts in the field, and each notice to involve maximum includ ing criminal liability, where the commission finds that safety is affected by economics

All private and public bodies must comply with the Lisbon ‘Economic and structural reform strategy’. Studying risk was an important activity since the ancient times bu t only after 1900 further studies were made, when the concept of risk management was founded.

"Risk management requires a logical approach, methodology of future uncertainties created in order to allow us to operate in a prudent and productive way, avoiding wasting resources" 1.Cristian Nicholas Stoina.

The success of a company depends on the ability of the management ro innovate by also taking risks. Following an investment decision a rational, convenient and competitive alternative is selected in order t o obtain the desired results from the cautious use of investment funds, through strategies based on technical and financial programs. An investment decision is influenced by the environment in which the entity operates, by all endogenous and exogenous factors and their interaction.

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Management decision shall select several alternatives relative to the competitive environment, evaluated on the basis of a set of indicators to measure economic efficiency and the degree of achievement of the technological characteristics through processes that protect the environment.

Investment efficiency is given by way of training and the importance given to the investments in the decision making process.

The main aspects that justify the significance of investment decisions are:

1 Investment is the development of an entity and its presence on the competitive market. 2. Investments use and material, financial and human resources consume.

3. Material and financial resources are consumed irreversibly.

4. Investments are influenced by exogenous factors, by the economic and financial environment in which the entity operates, by the capital employed in the investment, the possibility of attracting funds by issuing bonds and bank loans actions.

5. Investments are made in light of information obtained through in-depth studies of marketing, production, new technologies, economic and financial analyzes of specialized human resources.

The manager's responsibility in the investment is influenced by the complexity attributes that he t akes into account, by business objectives, the strategies employed, the way he prepares financial plan, by the budget year and by keeping the financial balance of income and expenses.

-Management to take an investment decision is based on: -Mathematical analysis

- Financial analysis static method - Financial analysis cash flow method - The ability to leverage

- The calculation of working capital required

3. The ratio of return and investment risk

In making investment decisions their risks are also taken into account , the ratio of return and risk is calculated in order to establish an investment strategy and funding.

Thus we have investment decisions made by:

- The administrative entity that performs its own or borrowed funds. - The owners or shareholders of the entity.

- The specialists of the financial markets.

Any investment involves a gain in a period that is its profitability. Most commonly used method of calculating the percentage return on investment is in the form:

Capital gains- the amount invested Profitability percentage = ――――――――――――――――――――

amount invested × 100

Any action involves some risk of not achieving the objectives. As we invest more, the risk is greater and the less we invest and the lower the risk.

The strategies used by the manager differ from one entity to another depending on t he nature, possibilities and expectations of the economic entity.

Investors decide according to various parameters such as: -The duration of the investment.

- The amount available for investment. - Risk.

-The allotted time for economic and financial analysis and the degree of satisfaction of the information received.

- Diversity of concomitant investments. - Additional costs when using borrowed capital. Investment risk can take various forms: 1 Inflation risk

2 Exchange rate risk 3 Interest rate risk 4 Maturity risk 5 Political risk 6 Credit risk 7 Business risk

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„ACADEMICA BRÂNCUŞI” PUBLISHER, ISSN 2344 – 3685/ISSN-L 1844 - 7007 8 Operational risk

9 Optional risk 10 Moment risk 11 Market Risk 12 Credit Risk

13 The risk of solvency 14 The liquidity

15 The risk of changing the legal frame

When assuming an investment risk the manager should consider all of these risks, to make transformation and influence scenarios of all thecriteria listed above, and tailor to the target he wants to achiev e.

But manager decision should also take into account other factors that must be followed such as: - The field in which the investment is made

- Type of investment: long-term or short-term

- Sources of financing used: equity, borrowed capital, leasing, capital by issuing shares

- Lifespan of the investment and the value of the investment project payback in connection to the duration of use and the estimated revenue.

-Supply resources for the materials. - Information Resources purchased - Human resources available.

Based on these factors managers perform calculations and analyses based on cost -benefit formula, and the decision it deems appropriate.

4. The probability of obtaining the desired result

Probability is that possible state that can be achieved on the basis of empirical or scientific analysis calculations. Probability measures the possibility of a phenomenon happening, that can have both positive and negative character. The probability is influenced by the level of confidence of the subject.

5. Uncertainty in investments

Uncertainty is determined by knowing the present factors of influence and the future effects which are expected to be achieved. Uncertainty is characterized by distrust, disagreement influenced primarily by failure or lack of information needed to make safe decisions without ambiguity and deductions.

Uncertainty is connected to the person who makes the decisions, the degree of understanding of the phenomenon, the way the information was presented, the confidence that one has towards people that give that information, the quality of information received, the experience available.

Uncertainty affects the entity and has effect in diminishing the ability to achieve its target or mission.

Scientists have shown that there is a strong connection between the personality of the subject and the quality of the decisions made.

6. Conclusions

Our economy is faced with numerous problems, change is observed qualitative through investment, of policies and strategies for sustainable economic development, through to entrepreneurs, institutions of local and central state, but must be must be made a moreomy and Calitetea life of humans. Greater attention on money efficiency and the role all specialists in the development of investment projects.

Estimation of the risk in an investment includes the discovery of risk factors, the degree of probability and uncertainty caused by the subject who makes the decisions, the quality and quantity of information received by him, of how to perform analysis and calculations for assessment and mitigating of negative consequences.

7. Bibliography

[1]. Constantin Caruntu, Analiza economico-financiara a firmei Concepte. Metode . Aplicatii Editura Universitatea Craiova 2008

[2]. Cristian Nicolae Stoina, Risc si incertitudine in investitii Editura Teora 2008;

[3]. Dumitru Caracota, Previziuni macroeconomice Editura: Fundatiei Andrei Saguna anul 2006 Constanta; [4]. Elisabeta Nicorescu, Marketing- Editura Fundatiei Andrei Saguna anul 1996 Constanta;

[5]. Flavia Stoian si Ana Morariu Audit financia, editura ASE Bucuresti anul 2010;

[6]. Ghorghe Basanu, Mihai Pricop Managementul aprovizionarii si desfacerii. Editura economica 2004;

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[7]. Gheorghe Negoescu, Rrisc si incertitudine in economia contemporana. Editura Altergo-Cristian- Galati 1995 [8]. Gheorghe Valceanu , Vasile Robu, Nicolae Georgescu, Analiza economic-financiara, Editura Economica; [9]. Irina Isaic –Maniu, Masurarea si analiza statistica a riscului in economie , Editura ASE 2003;

[10]. Mihai Toma, Finantele intreprinderii , Editura Economica, Bucuresti1998;

[11]. Neluta Mitea, Contabilitate financiara Editura, Fundatiei Andrei Saguna, anul 2008, Constanta ;

[12]. Thierry Fusalba, Traducere Vasile Dan, Managementul crizei -Cum sa planificam si sa punem in practica o strategie de iesire din criza, Editura CH BECK, Bucuresti 2012.

[13]. Publications: Tax Advisor, Expert accountant Magazine, Company management Magazine, Accounting and Accounting Expertise Magazine, Economic Tribune, Strategic Management Course, found on the internet (no author, year etc.)